Contract - Unit 4 Flashcards
Chapter 6 - Express and implied terms and 7 - Exemption clauses
What are the 2 types of terms in a business contract?
Express and implied terms
How can you incorporate express terms into a contract?
1) Get the other party to sign them
- In the absence of misrepresentation, they will be binding
2) The second best way to get express terms incorporated is by giving reasonable notice before/at the time of contract
This will depend on factors such as the type of document (whether it’s the type of document you’d expect to have Ts and Cs in), the legibility of the terms and onerous terms (have to do more than normal to bring it to the other party’s attention) ‘big red hand’
3) Last way of getting terms incorporated is through a previous CONSISTENT course of dealing (on exactly the same terms)
What are the classification of terms?
Traditionally, terms were always seen as conditions or warranties.
Conditions = important terms of the contract & therefore if a condition is breached, the other party has the possibility to terminate future performance of the contract AND claim damages.
Warranties = minor terms & if these are breached, only damages are available.
Innominate terms = terms where there could be a whole spectrum of potential breaches.
With innominate terms, have to wait and see how serious the breach is. Only if the breach SUBSTANTIALLY DEPRIVES the innocent party of all the benefit they expected to get, they will be able to terminate the contract.
Otherwise, only entitled to damages.
How can terms be implied?
By custom or trade usage
Can be implied in fact based on the presumed intention of the parties - so obvious that it goes without saying
Can be implied in law - contracts of common occurrence
By statute - e.g. Sale of Goods Act 1979
What are the Sale of Goods Act ss13 and 14?
- These are conditions of the contract (important terms).
ss13 - implies a term into contracts for the sale of goods by description - that the goods should comply with that description.
ss14(2) - implies a term where goods are sold in the course of the business that they should be of satisfactory quality.
ss14(3) - implies a term where goods are sold in the course of the business that they should be fit for purpose.
What are the remedies under the Sale of Goods Act?
What are bars to rejection?
Remedies =
If one of the above implied conditions are breached, the innocent party can:
- Reject the goods within a reasonable time & get a full refund & damages.
Bars to rejection:
Where the goods have been accepted (kept beyond a reasonable time)
Where the breach is so slight, it would be unreasonable to reject
With these conditions, there is STRICT LIABILITY - doesn’t matter why the goods don’t conform with their description or why they’re not of satisfactory quality
What is the Supply of Goods and Services Act 1972? (Business to business contracts)
s13 - Where work or service is done in the course of a business, it should be carried out with reasonable care and skill. (Innominate term)
s14 - If no time or performance for the work has been specified, it should be carried out within a reasonable time.
s15 - If no price has been fixed, it is implied that a reasonable price will be payable.
How does the Supply of Goods and Services Act 1972 also apply to goods?
s3 - implies a term into contracts for the sale of goods by description - that the goods should comply with that description.
s4(2) - implies a term where goods are sold in the course of the business that they should be of satisfactory quality.
ss4(5) - implies a term where goods are sold in the course of the business that they should be fit for purpose.
When does the Consumer Rights Act 2015 apply?
Applies between traders and consumers (Traders to consumers)
Consumer rights in relation to goods - have the same requirements as above - should fit their description, be of satisfactory quality and be fit for purpose.
However, the REMEDIES are different.
How can you incorporate express terms into a contract?
1) Get the other party to sign them
- In the absence of misrepresentation, they will be binding
2) The second best way to get express terms incorporated is by giving reasonable notice before/at the time of contract
This will depend on factors such as the type of document (whether it’s the type of document you’d expect to have Ts and Cs in), the legibility of the terms and onerous terms (have to do more than normal to bring it to the other party’s attention) ‘big red hand’
3) Last way of getting terms incorporated is through a previous CONSISTENT course of dealing (on exactly the same terms)
What are the remedies for the Consumer Rights Act 2015?
Remedies:
Consumer rights in relation to goods:
- Short term right to reject (within 30 days) and a full refund
- If beyond that 30 days and it’s proportionate, have the right to repair/replacement
- Right to price reduction or final right to reject but only get a partial refund
Consumer rights in relation to work/service:
- Right to repeat performance (to be performed again) or a price reduction.
What is an exemption clause?
Any clause that makes it harder for the innocent party to get their remedy or enforce their legal rights.
These are typically hidden away in the small print
What are the 3 hurdles that must be cleared to rely on an exemption clause?
Defendant must show:
1) Exemption clause was incorporated into the contract
2) As a matter of construction, the exemption clause was purporting to exclude the particular breach and the damage it has caused
3) In relation to B2B contracts, have to pass Unfair Contract Terms Act (UCTA). For traders to consumers, have to pass the Consumer Rights Act 2015.
How can you incorporate express terms into a contract?
D must show that the exemption clause was incorporated into the contract.
1) Get the other party to sign them
- In the absence of misrepresentation, they will be binding
2) The second best way to get express terms incorporated is by giving reasonable notice before/at the time of contract
This will depend on factors such as the type of document (whether it’s the type of document you’d expect to have Ts and Cs in), the legibility of the terms and onerous terms (have to do more than normal to bring it to the other party’s attention) ‘big red hand’
3) Last way of getting terms incorporated is through a previous CONSISTENT course of dealing (on exactly the same terms)
How can the defendant show the exemption clause was constructed correctly?
As a matter of construction, is the exemption clause purporting to exclude liability for the particular breach and loss?
The contra proferentem rule applies - exemption clauses are construed AGAINST the party seeking to rely on them. - So if there is any ambiguity at all, it will be construed against the D.
